Insights into a Comparative
Market Analysis (CMA)

What
you should know about A Comparative Market Analysis:

The housing market is ever changing. A Comparative
Market Analysis, or CMA, is an evaluation of similar homes that have
recently sold, or are for sale in a specific area. A CMA is very important
in terms of accurately pricing a home for sale if you are a seller.
A home priced too high will not likely sell and a home priced too
low is just throwing away dollars to a seller. Equally important,
for a buyer, a CMA will help determine its affordability and its mortgage
financing.

It is important when developing a CMA to compare
similar homes, which are often called "comparables" or "comps."
These would be homes of similar size, condition, age, and style in
a specific neighborhood. These key elements are used to determine
an estimated fair market value of a home.

This is part of an on-going series of real estate
articles by Nick Santoro and Joe Santoro of Personal Property Managers
who service Pennsylvania and New Jersey and specialize in real estate,
home content downsizing, property management and estate sales.

A CMA, which should be completed by your real estate
agent or a licensed appraiser, is an effective tool for sellers when
determining what price to list your home for, and for buyers, to check
the value of the home before submitting an offer to purchase. A CMA
is also an important tool the lenders will use in evaluating the value
of a home and thus an approved mortgage valuation.

A CMA is more than just looking at numbers. Knowing
something about the dynamics of the market that you're buying or selling
in, and why one house on one street might sell differently; for more
or less than a comparable house on another street, even in the same
town - is instrumental in making evaluations of price based on the
information presented.
When selecting comparable properties for a subject property, there
are many important aspects to consider.

First, sales that are far above or below the group
of comparable are suspect, with likely valid reasons for the difference,
yet not a good "comp" for your subject property. If there
are enough recent comps, disregard the "high" and the "low"
of the group.

Next, comps should be pulled from the subject property's
area, or as close as possible, to get the most accurate neighborhood
value. The most effective ‘comps’ are derived from similar
homes within the same community or development, within close proximity
and also factor in the property overall condition, upgrades and or
work needed on a home. Today’s buyers are very different vs
years ago and are very hesitant to invest lots of money into a home
that requires significant updating.

When possible, use similar type construction properties
to compare your subject property to. For instance, if your subject
property is a single-level style ranch, look for other, similar homes,
rather than a 2-story Colonial style home, to compare it to within
the same geographic area and withing the same community. .

Finally, use sold listings that are as recent as
possible. Markets change quickly, and what may have been the "right"
price six months ago, may not be the case in today's market. Sold
properties are a more accurate depiction of the value of a property
rather than listed homes for sale.

Another aspect of a CMA is comparing what is currently
active and on the market with your subject property, in real-time.
Knowing that some of the highest sold comps will come from periods
when there was less inventory available, or that lower comps might
come from a time when there was a higher inventory, your list price
as a seller (or offer price as a buyer), might need some adjusting
based on how the market is performing now - rather than what it was
doing when the comps sold in your CMA.

For example, if you're in a market where there is
a low inventory, and prices are being driven up higher, as a buyer,
you may think twice about offering a lower price for risk of being
out-bid by another buyer. As a seller, if prices are moving downward,
your house may sit on the market because it's priced too high for
today's market.

When comparing properties, there will always be
differences. Adjustments can be made to a subject property's value
estimate for differences in land size or acreage, features (such as
the number of bedrooms and bathrooms, garage or not, etc.), or any
financing differences that could have impacted sales price (like distress
sales or family sales, for instance).

It's a well-known saying, because it's true: "real
estate is local." Being educated about the local market, and
choosing the most appropriate comparables, is key to having the most
accurate comparative market analysis possible.

For more insights, tips and videos please visit our
Resource
Page in the About us tab.

For more information on real estate or home downsizing please contact Nick Santoro or Joe Santoro of Personal Property Managers at 215-485-9272 or 908-368-1909. Personal Property Managers specializes in helping home owners transition from their home of many years into a new community. Personal Property Managers services Pennsylvania and New Jersey and offers downsizing services, estate sales services, home staging, discount full service real estate services via its association with EveryHome Realty. Learn more about Personal Property Managers from our recent News Stories.